Find Me Funders
What a factor rate actually costs
Put in the advance, the factor and the term. Get the total repayment, the cost in dollars, and what that works out to annualised.
Factor rate → total cost
A factor rate is a multiple, not an interest rate. 1.35 on $50,000 means you repay $67,500 whether that takes four months or twelve.
- Total repayment
- —
- Cost of capital
- —
- Cost as % of advance
- —
- Approximate APR equivalent
- —
The APR line is an approximation for comparison only, using the term you entered. A factor rate carries no time dimension — pay it off faster and the dollar cost is identical while the APR equivalent rises. That is the part that surprises people.
A factor rate is a multiplier, not a rate. Multiply the amount funded by the factor and you have the whole obligation, fixed the moment you sign. Nothing about it accrues, and paying it off early usually does not shrink it.
That makes it impossible to compare against an APR without one more piece of information: how long you actually hold the money. This calculator adds that piece, then shows you both numbers so you can see how far apart they are.
The annualised figure treats the payments as a level stream and solves for the periodic rate. It is a way to compare offers on one axis, not a rate any funder is quoting you.
The terms in this calculator
Questions about the factor rate to cost calculator
Is a factor rate the same as an interest rate?
No, and the difference is the whole point. Interest is charged per unit of time on a balance that shrinks as you repay. A factor rate is applied once, to the original amount, and does not move. A 1.30 factor is not 30% interest; depending on the term it can be anywhere from the high twenties to well over 200% when expressed as an annualised rate.
Is a 1.4 factor rate high?
That question cannot be answered without the term. A 1.40 on 50,000 costs 20,000 whether you repay it over four months or eighteen. Over four months that is an enormous annualised cost; over eighteen it is a different animal entirely. Put both terms into the calculator and look at the gap.
How do I convert a factor rate to an APR?
You cannot, without fixing the repayment schedule. Once you know the amount, the factor and how long the payments run, you can solve the payment stream for a periodic rate and annualise it. That is what the annualised figure here does.
Does paying a merchant cash advance off early save money?
Usually not. The obligation is the purchased amount, not a balance that accrues. Unless your agreement contains an early-payoff discount in writing, repaying sooner pays the same dollars over less time, which raises the effective rate rather than lowering the cost.
What should I include in the fees box?
Everything deducted from the wire or added to the obligation: origination, underwriting, program, risk and ACH set-up fees. Ask for the net funding amount in writing and work back from it — that is the number that actually reaches your account.
Why does the annualised number look so large?
Because short money is expensive money. A fixed cost spread over a short repayment period annualises to a big figure by arithmetic, not by exaggeration. It is the correct comparison when you are weighing an advance against a product that quotes a rate.
Does the calculator know what any particular lender charges?
No. Nothing here is a quote. Every figure you see is produced from the numbers you typed. What each lender in the directory publishes about its own pricing is on that lender's page, including where it publishes nothing.
What is the difference between the amount funded and the purchased amount?
The amount funded is what the agreement says it is advancing. The purchased amount is the total you owe back. Neither is necessarily what lands in your bank account, because fees come out of the wire.
Can I use this for a short-term loan that quotes a total repayment?
Yes. Divide the total repayment by the amount funded to get the implied factor, enter that, and the cost arithmetic is identical.